'India can outpace developed markets on back of connected wearables adoption'

Timex Group's president and CEO Tobias Reiss-Schmidt says India can be among its top three revenue generators soon as consumer spending in the country is growing at a phenomenal rate.Gulveen Aulakh | ET Bureau | Updated: April 16, 2016, 12:17 IST

Timex Group's president and CEO Tobias Reiss-Schmidt says India can be among its top three revenue generators soon as consumer spending in the country is growing at a phenomenal rate. With a 20% annual growth rate, India can even outpace some of the developed markets on the back of rising adoption of connected wearables available at affordable prices and growing online sales, Schmidt tells ET’s Gulveen Aulakh in his first interview to Indian media, six months after taking the helm. Edited excerpts:

How important is India as a market for Timex?

India is a very important market, it ranks in the top five by revenue to us already. It becomes more important when I look at growth opportunity - its probably one of the markets, if not the market, where we see the strongest percentage growth in the coming years. India has grown an average of over 20% in the past three years, it is also something that we're aiming and we're well positioned to achieve in the coming years.

Can you better this 20% growth in the coming years given India's fast growth rate and rising purchase power?

There's an opportunity just based on development in India where we see consumer spending power increasing - its tripled from 2010 to 2015 - in another 10 years, it would probably triple again. Timex is better positioned than ever in the market place from brand, product, team and local production perspectives, so maybe we can even accelerate the growth. Its important to maintain quality of growth, sustain it, build the brand versus growing too fast and becoming too commercial, and make it unsustainable

Is India outperforming developed markets, which may be facing saturation now?

India is a very promising market in every regard, also in the connected products (wearable) also, very high smartphone penetration. The growth rates are much lower in other markets, due to market saturation, and we also have to adjust to e-commerce and digitalisation changes. Connected product (wearables) is currently driving a lot of the growth, which we want to participate in going forward. Our most important market is US, and there are other markets like Canada, Western Europe, that rank in the top five. If the growth rate of India continues, then it had a good chance to be in the top three markets by revenue very soon.

Timex India has turned profitable in quarter ended December 2015, after years of losses. Comment.

Timex India has always had a focussed approach to revenue growth. We have never looked at India as a market for short term gains. We have continued to make investments in research, marketing and manufacturing in India. This has started paying dividends for Timex India. Also, introduction of customised and higher margin products while having effective control on operational costs has also contributed to our growth and becoming profitable.

How is Timex keeping pace with India's growing e-commerce market?

We have two key players - Flipkart and Amazon. We are not using these as discount channels but rather at full price, using branded shops within these e-commerce channels. We're using them to give larger number of customers easy access, more effectively than some brick-and-mortar stores where we're not always in full control on how the brand shows up. I see this as a huge growth opportunity globally, and specially in India.

How much does online contribute to overall sales for Timex India?

Currently, its about 8-9% of total revenue. It is the fastest growing channel, so by the end of this year the contribution will rise to 11-12%, growth of around 50%, outgrowing growth from brick-and-mortar stores.

How does Timex view its strategy for wearables, in light of competition?

The connected product or wearable space is changing the watch industry and we look at it as a huge growth opportunity. We're approaching it differently from most of the devices you find out there today, from a watch maker's angle. If you look at the Apple watch for example, or Android devices, its really an approach of bringing the phone to the wrist. We're learning from consumer research that early adopters find the products cumbersome to use, too complicated, and 1-day battery life is a big hurdle. Often, the devices end up in the drawer.

Timex's point of view is different. So, the first product we'll be launching in India is Metropolitan+ which looks like an analogue watch and had activity tracking features on the watch, paired with any OS-based phone, and you can monitor progress on the dial itself. It also has more than 1 year of battery life.

In 2017, there will be a follow up to the Metropolitan+, analogue at a higher price point, where each hand is drive by the phone and connected to the phone - for example, you land in another time zone, when the phone adjusts to the time zone, the watch will adjust its own time automatically. You can create endless functionalities, customise and add dials to the watch.

The next logical step would be to add notifications to the watch, which along with activity tracking, are by far the most used features by consumers. So, there will be a family of watches.

Do you feel traditional watch makers like yourself have missed the bus on introducing wearables?

Our growth in India is proof that traditional watch still plays a big role. We welcome the trend towards connected devices because it will help put the watch back on wrists of younger generation that grows up owning a smartphone and does not need the watch to tell time. Watches as a fashion accessory will stay, while basic connected features will be part of more watches in four to six years.

We are working on some advanced technology ideas, which are advanced products that we're currently launching, more complex but we're not compromising on aesthetics as technology companies maybe doing.

Can India be the fastest growing market for wearables for Timex, given the smartphone penetration?

Not at this point, but it could be. Because there's also a price point barrier with connected devices. Right now, technology will add some cost to the product. We see big opportunity but it might take a while before technology becomes more affordable and it will appeal to a broader group of consumers in India. In two to three years connected watches will play a big role in the mass market.

We're looking to create concepts of basic connected watches which have notifications, for example, at sub $100 (under Rs 6,700). We haven't really worked it out but that's clearly very much in line with the basic idea of Timex brand, of good design and consumer relevant functionality at affordable price points. In 2018, we should expect a group of products that cover different needs, different price points and end users. India would be among the first markets to launch these products.

Wouldn't 2018 be quite late?

I don't think this is a first move market, but its a market that's still very immature, where products still need to bet much better. All companies still really have to understand what true consumer needs and preferences are, and I think there will be a lot of opportunity for years to come to bring ever evolved and improved product. I feel that some of the successful companies in activity racking and huge technology players like Apple and Samsung are creating a market and opportunity. Based on consumer research and feedback, the products are not perfect yet, but they're getting better. The rate of adoption by consumers will only increase.

Do you plan to expand the Baddi plant which makes analogue watches?

We're absolutely pro Make in India. We have some capacity available, it produces amazing product and the vendor network in India is constantly evolving, so our ability to make watch fully in India, becomes better, so based on that Baddi becomes more important to us as a facility that we might be using for some global product. In future, I can see Baddi playing a more critical role as a facility where we make watches for the global market. We're looking at Baddi at more as part of our global distribution and manufacturing network, alongside Philippines and China, rather than only making for the local market. The facility exports to SAARC countries right now, and some one-offs to Western Europe.

What investments are you making in India this year?

We're expanding our distribution network, opening 10-15 stores by the end of this year, taking the total number to 80. We'll also invest into our own e-commerce presence - introducing an option to buy from our own website. We may also link our offline stores back to the site for single day deliveries, and we're also exploring how to do cash on delivery across India, from 4,000 retail sales points. Working with a partner will be the fastest solution if we do it.

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